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TMI Blog2024 (5) TMI 845X X X X Extracts X X X X X X X X Extracts X X X X ..... pany is engaged in the business of providing audio, video, web conference to its customers. It filed its return of income (RoI) for AY 2013-14 on 31.03.2014 admitting total income of Rs. 37,23,48,860/-. Later, the RoI was selected for scrutiny. The AO noted that in the relevant assessment year, the assessee had entered into international transaction with its Associated Enterprise (hereinafter 'AE') to the tune of Rs. 1,33,64,73,845/-. Accordingly, a reference was made by the Transfer Pricing Officer (hereinafter 'the TPO') to determine the Arms Length Price (hereinafter 'ALP') in respect of the international transaction entered into by the assessee with its AE. Pursuant thereto, the TPO vide order dated 24.10.2016 made a downward adjustment of Rs. 7,53,90,367/- in respect of the international transaction of the assessee. Pursuant thereto, the AO passed the draft assessment order on 26.12.2016 computing total income of the assessee at Rs. 48,75,73,688/- in place of the returned income of Rs. 37,23,48,860/-. Against the proposed addition made in draft assessment order, the assessee filed objection before the Dispute Resolution Panel (hereinafter 'the DRP') and the DRP was pleased to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.11989 of 2023 dated 23.02.2024 of M/s.Taeyang Metal India Pvt. Ltd. v. DCIT/ITO/DRP, wherein, similar legal issue was asserted by the petitioner and the Hon'ble Madras High Court was pleased to allow the Writ Petition by quashing the impugned assessment order framed after time barring period u/s. 144C(13) of the Act. Therefore, he pleaded that the impugned assessment order be quashed. 6. Per contra, the Ld.CIT-DR, after verifying from the Office of the AO submitted that, the DRP directions were received by the AO on 18.09.2017 and admitted that the AO had issued a notice to assessee dated 21.09.2017 in order to verify certain details as directed by the DRP. Drawing our attention to the DRP directions at Page No.7, wherein, the DRP had recorded the objection No.15 of the assessee has directed the AO to verify the claim of the assessee and give relief accordingly. The objection No.15 of the assessee and the direction of the DRP are as under: 4.0 Objection No.15 That on the facts and in the circumstances of the case, Ld A.O. has erred in disallowing an amount of Rs. 38,221,482 under the impression that this represents royalty component included as part of management fees, wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts i.e. the AO received the directions of the DRP on 18.09.2017 (as confirmed by the Ld.DR before us); and thereafter, AO issued notice to the assessee on 21.09.2017 (refer Paper Book Page No.1) and thereafter, notice was again issued on 11.11.2017; and assessee objected to the AO passing the final order in November, 2017 (refer Page Nos.3 & 4 of Paper Book); and thereafter, AO framed the final assessment order on 21.11.2017. The question is whether the AO has framed the final assessment order well within the time prescribed by the Act or not. In this regard, it would be gainful to refer to relevant statutory provisions which is necessary for adjudicating the dispute: 144C. (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee. (2) On receipt of the draft order, the eligible assessee shall, within thirty days of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... months from the end of the month in which the draft order is forwarded to the eligible assessee. (13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153 or section 153B, the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received. 9. From a bear reading of the provisions stated above, it is noted that the AO at the first instance need to forward a draft of the proposed order of assessment (hereinafter 'draft order') to the eligible assessee after he proposes to make any variation in the returned income or loss which is prejudicial to the interest of the assessee. The assessee having received the draft order shall within 30 days file his acceptance of the variation to the AO (not relevant in this case) or file his objections, if any, to such variation with the DRP and the AO. In case, where the assessee has opted for filing an objection before the DRP, the DRP has to issue such directions as per sub-section (5) as it thinks f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wholly without jurisdiction and therefore, is null in the eyes of law. 11. The Ld.CIT-DR's only defense was that the DRP had given directions (supra) to the AO (to verify the claim of the assessee regarding objection No.15 raised before the DRP). According to the Ld.DR, sub-section 13 of section 144C of the Act, clearly states that upon receipt of the directions issued by the DRP under sub-section (5), the AO shall pass the final order inconformity with the directions of the DRP. And since, the directions issued by the DRP are binding on the AO, he issued notice to the assessee dated 21st September, 2017 to verify as per the directions of the DRP and since, the assessee did not comply/respond before the AO, the AO again gave final opportunity to the assessee by another letter dated 11th November, 2017 and thereafter, has passed the final assessment order on 21st November, 2017. However, we do not countenance such a contention of the Ld.DR for the simple reason that sub-section (8) precluded DRP from setting aside any variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order, because DRP has been empowered as per sub-section (6) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer cannot be permitted to defeat the entire exercise and render the same futile. When a statute prescribes the power to do a certain thing in a certain way, then the thing must be done in that way and other methods of performance are forbidden. Once the statute has prescribed a limitation period for passing the final order, it is expected that the internal procedure of the Department should mould itself to give meaning to and act in aid of the provision. Any procedural defect (there is none in this case) in the internal mechanism of the working of E-assessment Scheme, cannot operate against the interest of the assessee. Hence, the Faceless Assessing Officer cannot be believed that the Dispute Resolution Panel direction was received by him only on August 23, 2023 despite being uploaded on the Income-tax Business Application portal on March 25, 2021. The failure on the part of Department to follow the procedure under section 144C of the Act is not merely a procedural irregularity, but is an illegality and vitiates the entire proceeding." 12. The Hon'ble Madras High Court on the very same issue before us has held (relevant portion only) in the case of M/s.Taeyang Met ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 17.06.2022. The internal arrangement by which the assessment proceedings relating to the petitioner were purportedly transferred so as to ensure that the proceedings are not barred by limitation is not material for this purpose. Indeed, as contended by learned counsel for the petitioner, the communication dated 12.04.2022 from the PCCIT of the National Faceless Assessment Centre seeking approval for transfer so as to complete assessment within the period of limitation underscores the fact that the income tax authorities were mindful of the fact that assessment would be barred by limitation unless such assessment is proceeded with and completed expeditiously. 8. All that remains is to examine whether the assessment proceedings would be barred by limitation if computed from the end of June 2022. If so computed, the period of one month expired on 31.07.2022, whereas the assessment order came to be issued on 25.03.2023. Hence, the assessment order was issued beyond the time limit specified in sub-section (13) of https://www.mhc.tn.gov.in/judis Section 144C. By taking into account not only statutory prescription but also the interpretation thereof by the Division Bench of this Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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